New Changes to Per Diem Reimbursement Rates for 2023-2024

Per Diem Rate Background Information

Each year, the IRS releases an update of per diem travel cost rates. Employers use these rates to reimburse employees for the total cost of meals and lodging while traveling. These reimbursements are not taxable to the employee so long as they meet the following requirements:

• The employee provides and expense report in a reasonable amount of time.
• The expense report details the business purpose, date, and location of the trip, as well as all receipts from expenses incurred.
• The per diem amount paid is less than or equal to the federal per diem rate.

Employers can still pay their employees more than the federal per diem rate for travel expenses, but any amount over the federal limit will be taxable as wages paid to the employee. Should the expense report not provide all necessary information, all reimbursements shall be taxed as wages paid to the employee.

Changes to the 2023-2024 Per Diem Rate for Non-High-Cost Localities

Effective October 1, 2023, the standard per diem rate for lodging and meals will be $214.00 – this is up from $155.00 last year. $64.00 of this amount is allocated for meals and incidental expenses. Incidental expenses will not be changing and will remain at $5.00 per day. Incidental expenses include fees and tips paid at lodging.

Changes in Per Diem Rates for High-Cost Locations

The IRS is aware of the varying costs of travel by location and time of year, and as such it has issued a list of locations and periods in which the per diem rate is increased. The list of locations and spans of time in which the rate is increased can be found in IRS Notice 2023-68 under the high-low substantiation section. The per diem rate for high-cost localities effective October 1, 2023, is $309.00 of which $74.00 is allocated for meals and incidental expenses which remain capped at $5.00.

Additional information regarding this topic is available at IRS Per Diem Rates FAQs.

Conclusion

If you have any questions or concerns regarding the per diem rate and substantiating employee lodging and meals, please reach out to your Herbein team member through the form below.

Article contributed by Liam A. Jordan